How to File Taxes in a Community Property State

How to File Taxes in a Community Property State. Married people who live in one of nine community property states need to be especially careful when not filing a "married filing jointly" return.

File Taxes in a Community Property State

General Rules and Property

Step

Determine if you and your spouse live in a community property state. Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin are community property states.

Step

Determine if you're filing a separate return from your spouse. Community property laws are not tax-relevant if you're filing a joint return with your spouse.

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Step

Be aware that when community property rules apply, you must split community property income, adjustments and deductions - 50 percent to your spouse and 50 percent to you.

Step

In determining separate property, ask yourself if you owned property before the marriage. This is separate property even in a community property state.

Step

Determine if you acquired property during your marriage while you lived in a non-community-property state. This remains separate property even after you move to a community property state.

Step

Calculate if you had money before you were married or if you earned money during marriage while you lived in a non-community-property state. This money is considered to be separate funds.

Step

Determine if you inherited or were given property or money separately from your spouse during marriage. This is separate property or separate funds.

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Verify that, during your marriage, you purchased property using separate funds. This is separate property.

Spouses Who Lived Apart All Year

Step

Determine if you lived apart from your spouse at all times during the year and if you are not filing a joint return.

Step

Treat money from your earned income and your trade or business as your income alone. Don't include any income from your spouse's earned income and trade or business on your tax return.

Step

Treat money from your partnership interest and income from property you own separately as your income alone. Don't include any income from your spouse's partnership interest or separately owned property on your tax return.

Step

Treat your Social Security benefits as your income alone. Don't include your spouse's Social Security benefits on your tax return.

Step

Treat interest, dividends and income from jointly owned property according to community property rules.

Step

Treat military retirement pay and civil service retirement pay as community property income only if the two of you were married and living in a community property state at the time of military service or civil service employment. Otherwise, treat it as separate income.

Spouses Who Didn't Live Apart All Year

Step

Determine if you lived with your spouse at some time during the tax year and if you are not filing a joint return.

Step

Treat all money from earned income, trade or business, partnerships, dividends, interest and jointly owned property according to community property rules - splitting it fifty-fifty for the period you lived together.

Step

Treat military retirement pay and civil service retirement pay as community property income only if the two of you were married and living in a community property state at the time of military service or civil service employment. Otherwise, treat it as separate income.

Step

Treat income from separate property as separate income in Arizona, California, Nevada, New Mexico and Washington. Treat it as community property income in Idaho, Louisiana, Texas and Wisconsin.